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Claim first-time homebuyer credit

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in Small Business Tax

The 2008 bailout law created a new tax break for first-time homebuyers. The new economic stimulus law ups the ante.

Strategy: If you’re buying a home, complete the deal before Dec 1. Under a new law provision, you may be able to claim a credit equal to the lesser of $8,000 or 10% of the purchase price.

For this purpose, a “first-time homebuyer” is defined as someone who has not owned a principal residence for the three years prior to the purchase. So this tax break isn’t necessarily limited to newlyweds or singles fresh out of college. But the credit begins to phase out for an adjusted gross income (AGI) of $150,000 ($75,000 for single filers).

Also, the credit for a 2009 purchase must be recaptured on your tax return if you stop using the home as your principal residence in the three years following the purchase.

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